Posted on May 15, 2012 by WashingtonsBlog
Must-Read Background
Before we can understand what’s really going on with JP Morgan’s loss (which will probably end up being a lot more than $2 billion), we need a little background.
JP Morgan:
Is the world’s largest publicly-traded company
Is the largest bank in the U.S. … the biggest of the too big to fail banks which are killing the American economy
Is the largest derivatives dealer in the world (and see this), and derivatives are inherently destabilizing for the economy
Essentially wrote the faux “reform” legislation for derivatives, which did nothing to decrease risk, and killed any chance of real reform
Is the creator of credit default swaps – which caused the 2008 financial crisis, and is the asset class which blew up and caused the loss
Has had large potential exposures to credit default swap losses for years
Has replaced the chief investment officer who made the risky bets with a trader who worked at Long Term Capital Management … which committed suicide by making risky bets
Went completely insolvent in the 1980s
… and again in 2007 ( and was saved both times by the government at taxpayer expense)
Heads – with Goldman Sachs – the Treasury Borrowing Advisory Committee, which helps set government financial policy
Has a reputation of being the most risk-averse of the big Wall Street players
Was kept alive by a huge government bailout … but used the money to invest in India and other projects which won’t really help Americans
Has made a killing by kicking companies (and see this) and governments (and here) when they are down, engaging in various types of fraud (update), allegedly manipulating the silver market, and profiting on misery by acting as the largest processor of food stamps in America
In addition, JPM’s CEO Jamie Dimon:
Is a Class A Director of the Federal Reserve Bank of New York, which is the chief bank regulator for Wall Street (including JPM). Indeed, Dimon served on the board of the Federal Reserve Bank of New York at the same time that his bank received emergency loans from the Fed and was used by the Fed as a clearing bank for the Fed’s emergency lending programs. In 2008, the Fed provided JP Morgan Chase with $29 billion in financing to acquire Bear Stearns. At the time, Dimon persuaded the Fed to provide JP Morgan Chase with an 18-month exemption from risk-based leverage and capital requirements. He also convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired this troubled investment bank
Has a reputation of being the “golden boy” and smartest guy on Wall Street
Has been the chief spokesman and advocate for deregulation of banks, and has lectured, scolded and cajoled everyone who has questioned his banking practices
Jokes about a new financial crisis happening “every five to seven years”
What Does It Mean?
Pundits and consumers alike are reacting to JP Morgan’s loss like a startled herd of sheep.
They somehow believed that the “best of the breed” bank and CEO – the biggest boy on the block – was immune from losses. Especially since JPM has been so favored by the Feds, and
Lot more and many links to verify all that is wrote!!!!!!!
http://www.ritholtz.com/blog/2012/05/the-truth-about-jp-morgans-2-billion-loss/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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